“Wow, you guys are just traveling full time?! That is so great! How do you do that?”
Often when people hear about our nomadic lifestyle, they get excited about the possibilities. Many assume that you have to work 40 or more years to retire, or that long term international travel is only for college drop-outs and dirty hippies living on rice and beans. So when they meet us, two (somewhat) normal looking, articulate, and fun people, traveling the world in the lap of luxury, sometimes they start to wonder… “Could I do that?”
The answer we’ve shared with inquisitive fellow travel lovers over and over, is Yes.
What is the secret? It doesn’t require winning the lottery, inheriting a windfall, or getting lucky on some penny stocks. There is really only one thing that determines how quickly you could join us on the road: Savings Rate. What percentage of your income are you saving?
Let’s think of this in the most simple way possible:
If you save 10% of your income, after 9 years you could not work for 1 year.
If you save 90% of your income, after 1 year you could not work for 9 YEARS!
It really is that simple.
“Yeah, but who can save 90% of their income?!” Not me, and not most people. But how about something more than the average American savings rate of less than 5%? Being able to live an unconventional life requires doing unconventional things
“Yeah, but what about taxes, inflation, and the economy, man?” Interestingly enough, the higher the savings rate, the less these things matter. The higher the savings rate, the less the economy and record low interest rates and dividends matter.
Let’s use the below chart to explore some examples. This chart assumes that you are saving after tax income and receiving a real 6% future rate of return (an assumption I borrow from Warren Buffet.) It also assumes zero consumer debt, so it will take longer for people with existing non-mortgage debt.
While a 90% savings rate would enable a person to retire in less than 3 years, it would be quite impressive (and certainly easier on a $100k a year income than a $10k a year income).
A more modest 50% savings rate would enable cutting the cord after 16 years, and a 65% savings rate would get you out the door in just over 10 years.
On the other extreme, a person saving 5% of their income will likely be working their entire life.
As we approach our 1-year anniversary of full time travel and look back, and to answer the question we’ve heard from fellow travelers of “How do you do that?”, we can use the above graph to look at our own situation.
From the day that early retirement and full time travel became a real goal to the day that I submitted my resignation, it was exactly 10 years and a day. This was during a horrible economy, a stock market crash, a housing crash, record low interest rates, and a record low dividend payout. Factoring in inflation, the stock market hasn’t even returned to its high in the year 2000, 13 years ago.
Despite the economy and poor investment returns, we still made it. Our overall savings rate started relatively low (albeit high by average American standards), but as income rose and we learned how to be more efficient with our spending, our savings rate passed 70%. In hindsight, I even worked a few extra years while effectively saving our whole income.
To get to a high savings rate, we cut spending in the areas that are typically the largest money drains: transportation (a car), housing, food, and entertainment. By using a bicycle and the bus for transportation, living in a comfortably sized apartment in a walkable neighborhood, and finding joy in home-cooked meals and nature instead of consumerism, we eliminated or significantly reduced our cost of living while increasing overall happiness.
So to answer the question we’ve heard over and over again, “Could I do that?”
Absolutely you can. Start saving a high percentage of your income, and in a short period of time your investment income will start to pay your bills. What do you say, shall we meet up on the road in 10 years and A Day?
Curious to see exactly how high savings rates lead to Financial Independence? Read another post, Financial Independence: How Long Will it Take?
Great post. I couldn’t agree more!
I wrote something similar a while back comparing one’s ability to save to one’s ability to earn a high return. The former is significantly more important than the latter. In fact, you could be a downright poor investor, but if you’re an excellent saver you have a great chance to still knock it out of the park and retire extremely early.
Keep up the great work. I wish I could still be in car-free land with you guys! It was great while it lasted. :)
Absolutely, savings rate is so much more important than investment return, especially in the short term like a 10 year career. And in the long term, well… you’re retired! All is well :)
Come on down for a visit sometime. There is great car free living here
hard to imagine not having a car in the US.
thx for sharing your experience, very inspiring and useful.
A lot of Americans love their cars, and it does take a different way of thinking to go without. But when you find a nice place to live that is very walkable, and look at the cost of a car, it is amazing (to us at least) that more people don’t go without
Check out our resource page on Car Free Living for more ideas on how we thrived without a car: https://gocurrycracker.com/recommendations/car-free-living/
^^ i used to live in LA, it seems impossible to be car-free in LA.
I lived in LA (Hollywood) for a year in the pre-Zipcar days, and although I had a car, I put less than 1000 miles on it in a year and didn’t drive it at all for 4 months before selling it. The climate is perfect for biking and walking, and public transit is decent.
The car culture is big in LA, and the city is large and sprawling, but there are a lot of neighborhoods that are very walkable. So not impossible
I spent 3 months in LA without a car or bicycle. Bus system is awesome once you figure out the whole “transfer” system.
hi there again. I really find your savings to financial independence chart interesting but i can’t understand the logic of it. is it that if i save 90% of 100k, that 90k in 3 years will be able to build up to 25 times the 10k?
Yes, you got it.
thanks man. kept thinking how it works. i even created a google spreadsheet to help folks calculate that. I re-read some of your articles on losing $400k in the GFC and realize your stash must be more substantial than that. well done.
Fantastic…if you are earning substantially more than the average person. Even living in a walkable neighborhood, public transport to work (if possible even), home-cooked meals (which are more expensive than the unhealthy alternative), if you are only earning minimum wage you cannot possible save 25% of your income. This strategy only works for the 1 percenters who are not living the frivolous lifestyle that comes with having so much extra income that they don’t know what to do with it. Add kids into the mix and your plan is out the window.
Good to know, thanks.
Is that your current situation? Or is that just a hypothetical? Because you don’t think somebody on minimum wage can do it, nobody can?
“This strategy only works for the 1 percenters who are not living the frivolous lifestyle that comes with having so much extra income that they don’t know what to do with it.”
I hear this far too often. Off the top of your head can you tell me what a “1%er” makes? I’ll be glad to help you there: it tends to be well above $350,000 a year. I am in the top 20% and am able to save 50% of my income. When I was in the bottom 40% I was saving about 30% of my income yet still squandered plenty on eating out and coffee.
As long as you are coming up with excuses, you will never reach your goals. You will become so focused on being right, that you will sabotage yourself financially. For those Americans that are making minimum wage and raising three kids, sure, this may not be feasible, but most Americans are not making minimum wage, so your point is moot.
If you’re earning minimum wage, it’s more difficult, but possible. You need to look harder for housing and have roommates to split costs. Never use your income as an excuse to not save. We lived off of $21,000 salary when we were first married. Both had student loan debt and I was still in school and paying tuition. We still put the max into our IRAs those 2 years. My advice to anyone making minimum wage is to formulate a plan to get out of that situation. Find a better job, ask about employer sponsored training or tuition, government grants for school, etc…. It’s not going to be easy, but neither is driving a 15 year old car when your friends and coworkers are buying BMWs and Mercedes.
Awesome! I think the main thing is don’t accept a minimum wage job as permanent. It is critical to get to a higher level of income
Jacob at ERE touches on building wealth solely on minimum wage
Joshua Sheats from Radical Personal Finance have a good podcast on how to get to 1 mil while working on Walmart or something. I wouldn’t provide the link here as i think it will be taken down.
please post it
Hi Jeremy, thanks. I enjoyed this epsiode a lot last time even though i am not from the USA, as it is a study of how many options are provided to move out or move up in your Walmart jobs.
The underlying message is that some choices have to be made.
Hey, thanks fpr this awesome blog! I’m 23 years old and nearly finished college. But i realized a while ago that i won’t work in a high income industy.. At the moment my boyfriend works fulltime and i’m sometimes but we’re just able to save about 50 dollars a month. We live very thrifty. Do you guy have any tipps for us?
(Sorry my english sucks..)
Hi Ann, see this post. Your greatest return may be focusing on increasing income
Hi Go Curry Team,
Thanks a lot for sharing this post.
Well I was wondering about the fact, when you are married and have kids, how this would affect/interfere in your savings pattern?
Take a look at these two posts, about our thinking on the cost of raising children and saving for college
Im interested as to where you are placing the money that you are saving. If in stocks, how do you prevent yourself from getting taxed on earnings, to then get taxed on gains from investments. Pardon my ignorance in the matter. I am enthused with your progress and outlook, and wish to further my financial growth as well. For those years of tenacious saving were you also being taxed viciously? Thanks in advance.
Our asset allocation is here:
Tax strategy is here:
While working we of course paid taxes, Social Security, Medicare, and Federal Income Tax. Most of my career was in State with no Income Tax. By world standards, our tax rates were quite low
All the best
Okay, this may seem like a dumb question, but how are you defining “after tax income”? Or, more specifically, how do you calculate employer sponsored retirement plans and/or employer health insurance into that? While I love that you provide so many numbers, I have the unfortunate situation of working for a small employer with a SIMPLE IRA instead of a 401k. The big difference is the cap: $12.5k vs $18k in 2015, which is limiting my options. I’m just now getting back on track with this goal, so I’m trying to figure out how well I’m doing about pushing toward my goal.
Ultimately what you are aiming for is having at least 25x your planned spending in retirement in investments. This is ultimately what the chart above is showing
If you will pay for health insurance out of pocket in retirement, that needs to be included in your planned spending
With a SIMPLE IRA, I would contribute the max of $12.5k, contribute to a Traditional IRA (if tax deductible), and save additional funds in a Brokerage account. The difference in contribution limit doesn’t need to be a limitation to savings, although the tax bill will be a little higher.
First of all, thank you for the best financial resource on the Internet!
Now a couple of questions
1. Given that most of your income is from returns on stocks and dividends, do you have a contingency plan for handling another recession? If yes, what is it?
2. If you don’t mind sharing, what were your after-tax and pre-tax savings when you quit your job/s for good?
Re: #1 – Check out these two posts for details:
Re: #2 – We share all of our expenses, so you can see how much savings is required to support our lifestyle here: https://gocurrycracker.com/expenses/ (roughly $1 million)
Whether we have $1 million or $100 million or $1 billion doesn’t really matter, $1 million is enough
Wondering how the transportation aspect alone would work for my daughter and son-in-law living in a rural area where there are no county bus routes to take to work and riding a bike over 2-lane roads is dangerous because there are no bike lanes and no road shoulders for the commute. Plus, their son is 9 years old and not old enough to ride his own bike as far as he would have to for medical appointments, any school functions (the school is about 15 country miles away–no street lights, no shoulders, no sidewalks, no in-between towns, no people on foot), etc. FYI, folks in rural areas where the rural areas are not adjacent to bigger cities do not understand the concept of car pooling either. I applaud everyone living in a big city who has gotting rid of the big ticket item of transportation. Any suggestions for those in rural areas on substituting another big ticket item for that of transportation?
Personally, I would move
Maybe they can move closer to Grandma
This is one of the most beautifully written articles of all time. This inspired me and hope this inspires so many others in the future. Saving 90% would be extremely tough but I think we can manage to increase saving rate gradually. The most important thing to keep in mind is living within means and save and invest.
Thanks for sharing!
Wow is all I can say, the light bulb finally clicked on upstairs! Thank you soooo very much man! I swear this just finally clicked for me. I’m starting tomorrow to move towards FI in a way I was never taught before until I stumbled upon this blog yesterday. I have seriously barely slept the last 24hrs pouring over your posts, comments, & links. Pure freaking genius! I have worked so long and hard to get where I’m at not realizing that I was so much closer than I thought. I’m so stoked right now I can hardly contain myself. I’m currently saving with employer match around 55% @ an annual income of 132,000-150,000 depending on overtime and bonuses at the age of 41. After talking with my wife and some calculations we figured we can push that to 85% investing immediately. I can’t tell you enough how grateful I am for you guy’s and your sharing your success this way thank you thank you thank you! The only major question I have is if I start transferring my 401k into a traditional IRA then follow the Roth conversion will I have enough time to get it all transferred before 59.5 to avoid the taxes as much as possible?
Awesome, great news! You just made my day!
You don’t need to transfer funds before Age 59.5, RMDs don’t start until Age 70.5. But with annual income of $150k, getting the tax deduction now is the right move since it is at a relatively high marginal rate.
See this post for an example of a long Roth IRA conversion ladder and see if that helps
Awesome, thanks again for the advice and the help.
As of this morning we are on the way to 85% invested just waiting for our funds to clear our new Vanguard brokerage account. (both of our 401k ‘ s were with them anyway so that was an easy move)
When you started did you start with companies that paid lower dividends but you were able buy more Shares of or did you just jump right into buying businesses that are throwing out large quarterly dividends?
Also, did you keep your trading just to annual trades as you do now in the growth process to avoid the taxes of short term capital gains or did you eat the taxes during the working years to purchase more stock?
Thanks again, my wife and I will continue reading and learning as much as possible. I’m sure we’ll have more questions but we greatly appreciate what you have done here and can’t wait to join you guys in FI!
Would love to meet you guy’s when we do!
We don’t really trade, we just buy. And I avoid individual stocks and just focus on tracking the performance of the market through index funds
Our AA is here: https://gocurrycracker.com/path-100-equities/
Got it thanks!
I just found out that our HSA has a brokerage account as well which is another way to save big time. I just got done read Mad FIentist blog on HSA ‘ S!
I swear everyday I’m learning something new to put us closer I’m loving this!
When you are saving are you putting all your money into a brokerage account? Or are you putting it into 401ks and Roth IRAs as well? Right now I save >35% of my after tax income but almost all of it goes into a 401k or a Roth.
Tax deferred accounts first, then brokerage
Take advantage of all tax saving opportunities now
Hi I’m confused as to where to start with this I work as a nanny for a family which I don’t have a 401k or IRA I just have a regular savings account. My husband is a union carpenter in nyc, he has those things provided by his union which comes out of his pay. Are you saying he should add more money into his IRA? How do I begin with things like a brokerage account and tax deferred accounts for myself for now? I plan on becoming an RN in the very near future.Thanks
Anybody with earned income can open an IRA. Vanguard can do this for you for free.
This post explains more:
Ok and what about the brokerage account?
Also Vanguard. The link I shared explains more
we also live a somewhat nomadic lifestyle, dividing our time between Berlin, Miami and a few other places – and we get exactly the same comment from people: how do you guys do that?? and of course there are so many different ways of living a financially independent lifestyle and everyone has different needs (income and otherwise) – so thank you so much for sharing yours, I love following your blog and on facebook. happy travels!!
Love the site. Wondering what your plans are for the education of your cute newborn. I am in the same boat as you, have the savings but wondering if living a nomadic lifestyle would be right for the little one.
We’ll probably home school, but we have another 4-5 years to decide. Options abound.
Only you can decide if any lifestyle is “right.”
Amazing! Today I was talking to my wife about saving money. We are in their 30s, are each able to save 1K per year in the 30 year period will 60K without counting the interest. We will have a lot of money to spend on our retirement according to the pattern of Brazilian life.
I’m so glad that I ran into this. For the last 20 years, I’ve saved half my income and I’ve gotten to the point where I don’t have to work anymore. I did a few things differently (bought a house which generates income) but your model is so clear and easy to understand. What I’m trying to do now is create a small business that will create enough passive income that I don’t have to touch my principal. Thoughts on that?
Once my business can generate $2500 a month without my active participation, I’m going to convert a Sprinter van and visit friends and family around the continent. One thing I worry about is the loss of a sense of purpose. Have you experienced that?
> loss of sense of purpose
The opposite is true for me. There is more to life than pursuing a corporate agenda and creating more consumer goods.
You don’t need to work anymore, which means income is optional. Thus a side biz is optional. Sprinter van living could be done today.
I taught high school and ran environmental nonprofit programs, so I never had to worry about that corporate agendas or creating consumer goods.
I appreciate your perspective. I still uncomfortable drawing down my principal. As important as the loss of purpose, I want a side project/business that still connects me with people. In many ways, you have that with your family and even this website.
Thanks for the reply. Congrats on the life you’re created and the wisdom you’ve spread.
“If you save 10% of your income, after 9 years you could not work for 1 year.
If you save 90% of your income, after 1 year you could not work for 9 YEARS!”
Its late for me, but is that right? For 100k, saving 10% == 10k/year, so that would take 10 years to accumulate 100k savings to not work for 1 year (this assuming no investment gains), not 9 years. If you saved 90% for 1 year, thats 90k, which is at best not working for 1 year, not 9 years.
What am I not understanding about what you are saying?
You might be confusing income and cost of living. If you are saving 10% of your income, you are spending 90%. With $100k/yr income, saving 10% ($10k) for 9 years will result in savings of $90k, or enough to fund one year’s expenses.
But this accuracy isn’t that important. The point is high savings rates have immediate and significant impact to financial freedom.
See this postfor examples that include historical investment returns.
Fair enough. So the point is, assuming very modest cost of living, higher rates of savings can greatly accelerate FI/RE. True enough.
Updating my blog favourite link page … so I have added this page to it … again great stories … from north asia … From the Far Side of the Planet CPO
Hi, would say not a beginner but not average either. So if I were able to save 90% of my income after tax for 5 years, I would be able to withdraw 4% for 45 years while most likely still having money left in the portfolio?
Yes. With high probability
Even with a major crash? Also, thank you very much for writing.
Yes. That is why it is 4% and not 6 or 7%.
I feel like I’ve been a huge bother but this is my last question just to make sure I for sure understand what you’ve written (Thanks very much by the way).
So if I were able to save 80% of my savings after taxes, invest it, and live off what whatever is remaining after putting the 80% away. After 5.5 years, I would be able to retire with a very high percentage chance to live off 4% withdrawals for the rest of my life or only 25 years? Thanks again.
No bother, that is what the comments are for. Or try the forum for deeper dialogue.
It seems like you have been reading a bunch of stuff, but I’m not really sure where the “or only 25 years” comes from. Stepping back… the 4% Rule comes from the worst periods in economic history. Unless you expect to retire into a time period that is worse than the worst things that have ever happened, you will likely be just fine. Or in your example, just work 6.5 years and get to a 3% spend rate.
But it isn’t necessary to know any of this stuff to get started. Very little bad ever happens from saving a bunch of money.
I can tell Im overthinking cause it sounds too good to be true. Totally understand now thank you!
What formula did you use to generate that chart? Thanks!
I used the Future Value function in Excel/Sheets, using Goal Seek to find the number of years to get the portfolio value equal to 25x annual spending.
Here is the Google Sheets version of the math/chart.
Is the savings rate based on your gross or net income?
Usually net. Tax rates are low in retirement.